Commercial Real Estate: The Big Bust

There is an estimated $1.3 trillion (yes trillion) in commercial real estate mortgages coming due by 2013 (that’s 3 years away). It is widely believed that up to 65% of those deals are under water and will have difficulty getting refinanced. This has Congress worried. So I’m sure they have a plan. Right?

The plan: Drop the problem in Treasury’s lap. A bi-partisan  group of Congressmen sent a letter to Treasury telling it to take a more active role in encouraging lending to commercial real estate borrowers. Cop out. This is a way for elected leaders to look like they are being proactive when they haven’t really done anything at all. And do we really need Treasury to get involved?

Most of these non recourse borrowers do not want to refinance. And what bank will refinance a property that doesn’t throw off enough income to meet the debt payments. There’s a huge readjustment in CRE values on the horizon. Reminds me of this great scene:


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